Stock Market Commentary for 5/17/2021:
Here Comes The Money: U.S. companies have authorized a record-breaking $504B in share buybacks already this year, according to Goldman Sachs data. The enormous wave of buybacks will likely boost returns to shareholders, and it certainly shows that executives are bullish on U.S. equities.
– Bonds Rally, Show Fear: Bond yields rallied towards the end of last week, as investors anticipate Central Bank tightening. This appears to be a reaction to the consumer price index reflecting a 4.2% inflation rate early last week.
Cryptocurrency Takes Another Hit: Elon Musk issued a statement late Sunday that Tesla could possibly offload its Bitcoin, sending prices lower after a volatile week. The story is developing here.
- Stock Talk:
|The Winner of the Day: DoorDash|
|On Friday, DoorDash enjoyed its best day since the firm’s IPO. The massive 22.15% jump during the session came off the news that the firm’s order volumes tripled over the last quarter. This suggests that pandemic consumer trends have staying power.|
|What’s Moving Pre-Market: Electronic Arts ($EA) ↑ | Gartner ($IT) ↓|
|The Loser of the Day: Fox Corp.|
|Fox tumbled Friday on the news that the firm will be offering a streaming subscription service called FOX Nation. Many believe the firm is arriving far too late to streaming, and it will be difficult to navigate the competition.|
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Top Investment Story #1: AT&T Looks To Consolidate Further
What is Happening?:
AT&T is expected to announce a deal on Monday that would spin its WarnerMedia asset, including CNN and other notable cable staples, to Discovery.
Why Does This Matter:
In 2018, AT&T became the most indebted non-financial firm in the United States after acquiring WarnerMedia for $81B. Now that the firm is facing increased competition in its core business unit, and the landscape of traditional media is rapidly changing, it appears AT&T regrets their purchase.
This new deal is expected to include CNN, TNT, and TBS. AT&T has had multiple opportunities to sell CNN over recent years, but during the Trump presidency, the network posted impressive numbers and gained the top spot for total viewership across all cable networks. That has since changed, as Fox News reclaimed the #1 ranking this year. AT&T will retain HBO and HBO MAX.
For Discovery, the added assets can potentially help them build a more robust streaming offering. Discovery+ has struggled in its early stages. The service offers its staple nature-documentary catalog, along with popular HGTV and Food Network programming. With the potential addition of CNN, TNT, and CBS, the firm may be able to include exclusive sports streaming options and news specials on the platform.
AT&T investors have long called for the firm to sell its media assets. The company has become a massive conglomerate, being pulled in all directions by its rapidly growing debt. The stock has fallen 25% since 2016, and bulls hope that ridding the firm of its media burden will allow AT&T to put all of their energy into telecom.
This story is still developing. Monetary specifics behind the deal has yet to be established publicly. Such news will most certainly impact the direction in which both stocks move early this week. The good news is, investors believe that this deal makes sense for both AT&T and Discovery, should they announce its completion in the coming days.
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Top Investment Story #2: Retail Labor Imbalance
What is Happening?
The recent pandemic has exposed a shortage of digital skills in retailing. Tens of thousands of retail workers were laid off one year ago, as Covid-19-related restrictions required chains to close stores.
Why Does This Matter?
Once the drastic change in retail across multiple industries struck, many companies were left hanging out to dry. Countless companies went out of business, while many thrived. What lead to the night and day differences seen across these various industries? It all boiled down to adaptability.
Companies like Choice Market launched checkout-free shopping in April. This allowed shoppers to scan items on an app and leave the store without interacting with a cashier. This may seem logical and easier upfront, but they actually had to retrain their employees. A former cashier had to learn an entirely new skillset to stay employeed.
Instead of staffing a cash register, employees used a computer to create detailed drawings of the store layout, so the system knows where products sit on shelves and then monitors what is being sold. Employees also needed to be proficient in the platform that integrates Choice’s third-party delivery systems, with Uber Eats and GrubHub.
Companies like Verizon and Walmart plan to implement retraining for thousands of employees with the plan to change the path of their retail business.
The pandemic continues to change the way businesses operate, and the task of having to retrain employees to take business in a different direction could be challenging. Keep an eye on retail companies as they begin to implement new methods and strategies.